The deal would put Kermit in the same stable as Mickey Mouse

Disney chairman Michael Eisner said an announcement might be made soon on a deal involving the Jim Henson Company.

Disney had been on the verge of buying the company more than a decade ago, but the deal collapsed after the death of founder Jim Henson.

Earlier this month German media company EM.TV, which bought the Henson company in 2000, called off talks with a consortium of buyers led by TV tycoon Dean Valentine.

Mr Eisner told Disney's annual shareholders' meeting in Denver, Colorado, that Disney and Henson had been in talks for 15 years.

"I would not be surprised to hear that there would be an announcement soon," he said.

"I wouldn't be surprised that The Walt Disney Company would be finally culminating years of romance."

He did not specify a possible purchase price but said it probably would not be anywhere near speculative figures of $100m to $200m (�63m - �126m).

Disney also cut its earnings forecast for 2003, blaming sluggish retail sales and a downturn in tourism.

Chief financial officer Thomas Staggs said had nerves over the war had hit attendance at Walt Disney World in Florida.

At the same time, though, figures were up at the company's Disneyland resort in California.

Its Florida resort is more dependent on air travel, while Disneyland draws more of a local crowd.